And You Thought the Jones Act Was Dumb…

A mack truck on the highway

If you tasked me with creating a list of the greatest threats to America, I’m not sure cabinets, name-brand drugs, and semi-trucks would be on there…but the President disagrees.

So, get ready for a massive economic bulldozer to hit the US due to these new tariffs. With 90% of all US cargo moving by truck, these higher costs will create a ripple effect through every sector. This all started back with the Jones Act, which made domestic shipping prohibitively expensive, causing a shift in freight from ships to rail to (almost entirely) trucks.

Since those trucks are made across an integrated North American supply chain, dipping into Canada, the US, and Mexico, tariffs are hitting hard. That means everything Americans consume, from your food to your clothes, will cost a whole lot more.

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Transcript

Hey all, Peter Zeihan here coming to you from Colorado today. We’re talking about the newest hit to the American economy. We now have tariffs on cabinetry, semi-trucks. And what was the third one? Name brand drugs, all of which have been classified as national security threats. Cabinetry. That’s an interesting one. Anyway, we could pick apart this all day, but I’m going to focus on the trucks because that’s the one we’re all going to feel soon. 

And most deeply, right now about 90% of all cargo, all ten miles of cargo that are transported to the United States are transported on the roads by semi-trucks. Now, it didn’t used to be this way. If you go back to, the depression, we had something called the Jones Act, the Interstate Commerce Act, which said that any to any cargo transported between any two American ports, regardless of where they were, had to be on a ship that was American built, American captain, American crude and American owned. 

As a result, we saw the cost of transport on the waterways increase in terms of, cost per ten mile by a factor of five. And we went from transporting most of our goods and especially most of our intermediate manufactured goods, especially in places like, the Great Lakes in the upper Midwest. We went from that being the dominant mode of transport to basically at whittling away to today in terms of ton miles, we only use our waterways for about 1% of our total cargo. 

It has been, in my opinion, the stupidest law that the United States has ever adopted. And it’s now been in place for a century. As a result, things went places where those restrictions were not in place. first with train and now with truck. Now with the Trump administration policy, there’s 100% tax on those trucks, of which about 80% of the imports come from Mexico. 

Another 10% from Canada. And As with anything that involves NAFTA, nothing that just made in one of the three countries. It’s an integrated supply chain that uses all three. So basically what we’re doing with this new tariff is saying this multi-step supply chain that we have, where parts of the trucks go back and forth among the three countries, if the finished product is actually done in Mexico, which is the relatively low cost work we will then tariff the cost of the entire truck when it comes back. 

So, in essence, retrofitting American workers and American companies who are making American products, who just happen to have the bumper stamped on in Mexico, and since 90% of our cargo is transported by heavy truck, you’re going to feel this in every sector. It doesn’t matter if you’re a hog farmer in Iowa sending your hogs to market, or if you are just ordering something on Amazon, it’s getting shipped across the country. 

The only people who will not feel this are the people who are in a physical position where supply chains for imported goods do not use the trucks, and that means you would have to be in one of the major port cities that has a mega port. So those are New York, new Jersey, Miami, Houston, Savannah, to Colma and LA Long Beach. 

Anyone else? This is going to hit everything that you consume. So I have long said that the Jones act is the dumbest law we’ve ever had, but it’s got some competition.

Testing NATO

Flag of NATO

Putin just took things one step too far. After sending Russian drones and jets into NATO countries’ airspace (and denying responsibility of course), President Trump has said to shoot them down; several European leaders from NATO and the EU are standing by.

We’ve known all along that Russia was never going to stop in Ukraine. They need to secure more defensible borders, which means pushing into places like Poland and the Baltics. Russia has been testing the patience of Western leaders throughout the war, and it seems he’s finally found the limit.

While the US isn’t certain that allies can back them up in terms of force projection, many European powers are on the cusp of a massive military buildout…so we’ll find out soon enough what NATO’s capabilities look like. One way or another, there is a larger war on the horizon.

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Transcript

Hello, Peter Zeihan here, coming to you from Colorado. And today we’re going to talk about what’s going on in Europe militarily. The Russians have sent several dozen drones into a number of of the eastern tier of nation states, including Estonia, Poland, Denmark and Romania. Just disavowing, of course, if it’s any of theirs. But they’ve also sent, monitoring aircraft and fighter jets into almost all of these places and more. 

And the discussion now is whether or not the NATO states should actually meet them with lethal force and shoot them down when they make airspace violations. Donald Trump is now publicly on record as saying, yep, do it. And normally when Trump says something, I just kind of wait for the action. But on this issue, it is a clear and present, danger to NATO because the Russians have always, always made it clear that when they’re done with Ukraine, they’re coming for Poland and Latvia and Romania and several others. 

And we’re now getting to the point in the war entering the fourth year now where it’s time to start taking things like that a little bit more seriously. But let’s understand what the Russians are up to, and then we can all judge about whether or not this is the right thing to do. I don’t have an answer here. 

All I can do is lay it out for you. The Russians see that the only way that they can secure their interior territory is to re anchor their borders in things that are more defensible, like the Carpathian Mountains. 

Or the Baltic Sea. Strategically, that’s a very sound argument, especially when you consider that demographically the country is dying and very soon having a broad, wide open front that’s over a thousand miles long, 2000 miles long, 3000. 

It’s a long front. It’s simply not going to be viable for them. So the idea of their doing this isn’t crazy. But, a few dozen drones is not going to move the border. That triggers a few hundred thousand troops. And first they have to destroy and then digest Ukraine. So what are they looking at here? 

Well, they’re trying to see what NATO is capable of. And to be perfectly honest, I kind of want to know what NATO is capable of as well. You’d think with the 20 year war on terror, that the United States would have a really good idea of what NATO countries were capable of, but we really don’t. Part of the deal that we struck with all of the allies after World War Two is we’ll take care of the big stuff, and we get to write your security policies. 

And because of that, no one developed long range projection based militaries. Except for maybe the French, who are always one step in, one step out. And the Brits, who were basically a very loyal ally. But we’re not in that world anymore. And we saw in the war on terror that the United States basically drove the carpool for everybody when everyone decided to provide forces. 

So we know that the Dutch and the Brits, not to mention the Australians, have pretty good special forces, if small. And we know that the Danes, with the handful of ships that they have, have actually surprisingly good long range deployment capability. And then the Turks have no problem throwing 10,000 troops into a country that they border, whether it’s Syria or Iraq. 

But beyond that, we really don’t have a good idea of what these countries are militarily capable of. There’s some promising things going on. The Germans are going through a big rearmament. The poles beat them to the punch and have been working on it for 3 or 4 years, but they haven’t necessarily recruited the people they need to man the equipment. 

And so we really just don’t know. And what the Russians are attempting to find out is what can be known. So if you get NATO countries to engage Russian forces, how do they do it? Do they do it with overwhelming force? Do they do it with tech? Do they fail to do it? Is it just an issue of political will, or is there no technical competence? 

We don’t know. And the only way that you can find out how is to poke the bear, or in this case, have the bear poke you. So, there’s not a lot of secret here. The Americans don’t know what their allies are capable of. So showing your cards to the Russians. It’s unclear if that is a good or a bad idea. 

What I can tell you is that at least the political will seems to be shaping up because within hours of Trump saying, yeah, go ahead and shoot them down. We got the NATO secretary general who’s Dutch saying, yep, we’re going to do that. We got the EU policy chief, Ursula von der Leyen, who is not in charge of any military. 

So yeah, we’re going to go do that. The EU is not a military institution, but Wonderland used to be the German defense minister, and she has some concept of what she’s talking about. And as the United States has become less involved in European defense, the Europeans are trying to find ways to pick up the slack. And the EU is probably one of the institutions that’s going to be repurposed with that in mind. 

We even have countries like Austria and Ireland starting to talk about military cooperation now, countries that have been neutral for quite some time. And now we’ve got politicians in both Sweden and Germany also saying that now is the time for us to actually do something. So, for those of you who are historically minded like me, the idea of the Europeans arming up to fight a major war is a terrifying prospect, because it always goes horribly, horribly wrong. 

Especially if the United States is not involved in a very big way. But one way or another, it looks in the next few weeks to months, we’re going to have some concept of the capabilities of the NATO states. And regardless of what we learn, good, bad or indifferent, it is going to start the process of a massive rearmament across the continent as everyone gets ready for the war that they know was coming.

Say Goodbye to the World’s Trade Routes

Cargo ship with containers

It’s always lovely when everything you’ve talked about throughout your career decides to happen all at once. At this critical decade, how will the globes trade routes fare? And which routes will fracture first?

There are three major trade routes that come to mind. Southeast Asia is made up of many regional states that rely upon each other, so none of them want this to shut down. While this should hold, there are some other players (China, Japan, and India) that could add some tension. The Persian Gulf and Strait of Hormuz are easy to disrupt and will likely be the first to go; this will have an outsized impact on places like Japan, Korea, Taiwan, and China, that rely on oil coming through here. And the last route to keep an eye on is the Baltic Sea; the Ukraine War’s outcome will likely determine what happens here.

Bottom line…get your s*** while you still can.

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Transcript

Hey all, Peter Zeihan here. Coming to you from the Lost Creek Wilderness. I have moved out of the jump on him into the narrows. So I like a one sided canyon sort of thing. Anyway, trail goes. 

Back in there somewhere. Anyway, taking a question from the Patreon crowd, specifically, as globalization breaks down and as military alliances fracture, which trade route will fracture first become unusable? 

We’re at the point in history where there’s a lot of things going wrong at the same time. Most of my work has been saying that all of these factors, whether it’s demographics, globalization, American isolationism, European fractures, the Chinese fall, whatever happens to be, they all come together in about the same ten year period. 

And we have now entered that ten year period. So the partial cop out to answering this question is, I really don’t know, because everything is going wrong. And all of these, routes are going to be in some degree of danger. But let me give you the two that I think. Well, let me do the three that I think are most concerning. 

First, the one that I think actually will hold together and that’s the Southeast Asian route through, Indonesia, Malaysia, Singapore, Strait of Malacca, the Luna Strait, that area basically connecting Northeast Asia with the rest of the Eurasian continent. This is an area with 15 countries, all of which have their own ideas of what should happen, and none of them have the ability to project naval power, far enough for the entire zone. 

The reason that I think it’s still going to work out for this area, though, is that most of those countries in Asean and then link in to, say, Australia, see the world through similar lenses. I don’t anticipate them launching wars of aggression against their neighbors. They know that they occupy different parts of the manufacturing supply chain. 

They know they need inter-regional trade and agriculture and energy and intermediate manufactured parts. So they have a vested interest in finding a way to make it work. The problem would be countries from out of region India, China, Japan who might see things differently. But even here, I think it’s pretty safe to say, that it’s going to hold. 

Japan might try to raid Chinese shipping, but they have no intention of shutting down shipping through the region as a whole. With Australia, you have the Americans of all to a degree. And India is really not a trading power. And China, of course, if it’s going to survive in any form, has to have access to this trade route. 

So that one’s probably okay. The second one, the ones absolutely hosted so opposite is coming out of the Persian Gulf here. You’ve got a number of countries with limited global reach, but missiles and jets and drones would have no problem closing the Strait of Hormuz. And even if you get past the Strait of Hormuz, you then have India and Pakistan, who in a globalized world would love to see the other one lose access to things like energy. 

And so I can see any number of scenarios where Iran or Pakistan or India or Saudi Arabia or even the United Arab Emirates find it in their interests, at least for periods of time, to close that entire route down. And that’s 20 million barrels a day of crude that could no longer make it to market. It would have catastrophic impacts for everyone further east, most notably Japan, Korea, Taiwan, and especially China, which uses more than the other three put together. 

And then the third route, depends on what happens in the Ukraine war. The Baltic Sea has always been a zone of commerce, but it’s always been a zone of conflict. And in times past, the countries that are either adjacent to the sea or just one step removed. So we’re talking here, all of the Scandinavian countries Finland, Sweden, Norway, Denmark, also Poland, also Germany, also the United Kingdom, also the Baltic, also Russia, have all at various times in their history tried to militarize their part of the sea, to shut it down for the people. 

At the moment, everyone is on the same side except for the Russians. And the Russians are using the Baltic Sea because we’re still in globalization, barely to ship 1 million to 1 million, a half barrels of crude out to the wider world around sanctions. Sooner or later, that’s not going to work anymore. Either. The Western countries are going to interfere with the oil shipments, which I’m a little surprised hasn’t happened already. 

Or the Russians are going to say screw it and basically Mess up, corporate shipping on the Baltic Sea. One way or another, this is likely to happen. The question is, how long will it last? If Russia does well in Ukraine, it can last a long time because you don’t need to be able to poke out. 

All that much pressure collapses in Ukraine that this is no longer concern. And the issue is how Europe evolves or devolves in the future, whiskey or any number of directions. So Middle East shipments, most notably through Hormuz, look really bad. Red sea is not much better. Baltic something to keep an eye on. But there’s reason for hope. And then Southeast Asia. That’ll only break if things go really horribly bad.

What Does a Post US NATO Look Like?

A NATO flag with buttons of other countries flags on it

As the US steps back from NATO, which country is best suited to take the seat at the head of the table?

While the Germans have been the backbone of the EU’s financial model, they no longer have the people to keep up. So, who will step up? The French scratch this itch best, both militarily and as the future anchor of Europe. They have the most solid mix of everything necessary: population growth, nuclear arsenal, wine, etc.

There are some support players rising in the background as well. Poland and the Scandinavian countries have economies, militaries, and enough resilience to weather the storm that is headed for the EU. Together, these countries will define the future of Europe.

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Transcript

Hey everybody. Peter Zeihan here coming from, where am I? Bottom of the Tilden Canyon in northwest Yosemite. Taking another question from the Patreon crowd, specifically with the United States stepping back from NATO, do you think anyone will step up, most notably France? Yes, but probably not for the reasons you’re thinking. 

Europe has two institutions that define it NATO, the North Atlantic Treaty Organization, of which the United States and Canada are members. 

Everyone else is in Europe and the European Union, of which 27. I think it’s like people keep coming and going. 27 countries are members. NATO is a military alliance. The EU is a economic and financial grouping. The problem is, is the economic and financial grouping is failing for demographic reasons. The country that is paid for everything to this point has been Germany primarily. 

And Germany over the next ten years will basically age into an old folks home and convalescence can’t pay a lot of income. So, you’re going to have to see the entire European Union structure renegotiated away from the financial and economic union that we have right now. Because if there’s one thing the French are sure of, they’re not going to pay everyone to be part of the group. 

But if you make it a political and a military grouping, perhaps affiliated with NATO, perhaps not, then you’re talking about something that plays to French proclivities and their strengths. Remember, this is a country that has an aircraft carrier. This is a country that has an independent nuclear arsenal, and this is the only major country in Europe that has seen population growth. So whatever future Europe has ten, 20, 30, 40 years from now, France is going to be by far the most important piece of it. 

Second, there are a few other countries to look at. The number one is Poland. Poland is having a demographic moment. If they can’t get their birth rate up, they’re going to have some problems in 30 years. 

But that’s a problem for 30 years from now. For now, they’re a robust economy. They’re getting to the manufacturer in every possible way. They’re getting to defense industries courtesy of the South Koreans and since they have the Ukraine war going on right on the doorstep, they’re getting very big into drone technology as well. So whatever the future of warfare looks like, the poles are about as prepared as you can be. 

Everyone else is playing catch up. And then finally there’s a third group, the Scandinavians, mostly centered on Sweden. These are countries with better demographics, better financial situations. They’re not as dependent upon the European Union and the euro. In fact, some countries in the Scandinavian bloc aren’t even in the euro. So it could go away and they’ll probably be more or less okay. 

I mean, it’ll be a it’ll be a hard couple of years, but, it doesn’t define them in the way that it defines countries like the Netherlands or Italy. These are also countries that have always maintained an independent defense posture. Sweden and Finland, most notably. So whatever future defense issues in Europe bubble up. Sweden, Poland and France are by far the ones to watch the most. 

They’re also the ones to watch the most in terms of, economics, because their demographics are pretty good. And so if there is a post EU economic grouping in the region, these three are going to be part of it.

The Most Violent Chapter of Israel and Palestine

Buildings in Gaza destroyed from bombings

This topic is going to piss off everyone, regardless of where you stand. So, while you watch today’s video, take comfort in the fact that everyone will be offended. Now, onto Israel and Palestine’s ongoing conflict.

The Israeli invasion of Gaza has reached its most violent period yet. Netanyahu, who has aligned with extremist factions who favor the complete expulsion of Palestinians, is still clinging to his political power. And with no conventional military threats, the Israeli’s can focus all their efforts on Hamas.

Trump has sidelined the American security apparatus, leaving Israel with few external checks. With no one to intervene and both Hamas and Israel leaning further into their stances…there really is no good solution here.

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Transcript

Hey, all Peter Zeihan here. Coming from Colorado today, we’re gonna talk about Israel and Gaza. I’m sure I’m going to piss off everyone in this one. So, you know, if you are not pissed off, that would actually be a surprise. So here we go. The Israelis have launched a major invasion of the Gaza Strip, which is where about half the Palestinians live, specifically focusing on Gaza City, which is the largest urban center in the strip. 

Tanks are involved, artillery is involved, it seems, from what we’ve been able to see, incredibly indiscriminate. They seem to be deliberately attempting to drive people just to flee the area and herd themselves into smaller and more compact zones. Further south. By any definition, this is a horrific conflict, and we’re seeing more violence now in the last two weeks than we have seen at any stage of the Israeli-Palestinian conflict, going back to the 1946, 1947, 1948 period when Israel was created in the first place. 

There are more than a few reports that allies of the Prime Minister, Benjamin Netanyahu, are involved in almost gang activity, in various Palestinian territories, more in the West Bank than in the Gaza Strip. And under normal circumstances, this just wouldn’t fly. Not only would Israeli society not tolerate it, but you’d see a lot of pushback from countries across the world, most notably including the United States. 

We’ve seen that from a diplomatic point of view. We have any number of countries France, the United Kingdom, Australia, Canada who have now recognized Palestine as an independent entity, which from my point of view, is completely pointless because unless you’re willing to change the military facts on the ground, none of this really changes anything at all. 

And I don’t think it will. Now, that said, the only country on the planet that has the ability to militarily intervene in Gaza would be the United States. And there is no appetite in any American administration to do that. So I wouldn’t count on that either. Anyway, why has it gotten so bad? Why is it getting so bad so fast? 

Why are we in this seemingly new chapter and what this region looks like? Five things are going on. First and most importantly, when the initial attack by Hamas, that’s the political slash militant authority that used to rule the Gaza Strip, launched their attack across the border into Israel proper back in October of 2020. Three more Jews died in a 24 hour period than had died since the Holocaust. You can understand the baseline position that a lot of Israelis are coming from. I don’t mean to belittle that in any way, but there’s a lot more going on. 

The second issue is more strategic. Israel has been the superior military power in the region for the better part of the last six years, at least since the 1973 wars. There hasn’t been any force that can stand up to them on the battlefield or in the air. Over the 50s and the 60s and the 70s, they soundly beat all the Arab states in their neighborhood militarily. 

And all that’s been left is paramilitary and irregular forces like Hamas, militant groups, Hezbollah. But the Israelis dare not let down their conventional military guard, because while Hezbollah and Hamas are threats, they are irritants compared to, say, if Egypt decided to roll in with a thousand tanks. Well, that changed relatively recently. We now have a completely different strategic map of the Middle East. 

The Syrian civil war is over and the Assad government is gone. And the replacement government. Yes, it can hold together big. Yes. I wouldn’t call it pro-Israeli, but they certainly don’t want to fight with Israel. It’s more likely they’ll fall into a second civil war that will destroy any military capability of the state. And remember, Israel has already done a few thousand bombing ranges to take out pretty much every arsenal and chunk of equipment that they could find. 

Number two, Iraq is no more as a conventional threat, because of the Americans. Number three, Egypt, as, if anything, an ally. Same with Jordan through peace deals. Number four, Libya, which used to be an irritant, has fallen apart. And number five, Iran was defanged earlier this year in a series of strikes. It didn’t simply set the nuclear program back several months, but basically destroyed Iran’s ability to defend itself with air defense. 

So the strategic picture, for the first time in modern Israel’s history, is calm. I don’t want to use the word safe. This is still the Middle East, but they’re not worried about a conventional invasion from anywhere, which frees them up to deal with some of the unconventional threats that they’ve never really cared for. Ergo, Gaza. Third, politics in Israel are wonky. 

Benjamin Netanyahu is the PM was about to go to prison for bribery and corruption when he was elected last time. And as long as he’s the prime minister, he won’t go anywhere. So he has a vested interest in making the conflict as hard as possible in order to forge a coalition with the real Wackadoo in the Israeli political world, who just want to kill everybody who isn’t a Jew. 

And so that coalition has been sufficiently strong to keep Netanyahu in power, and they do not have a vested interest in seeking a peace agreement, even if that was possible. In fact, many of them see that expulsion of the Gazans from the strip to say the Sinai Peninsula isn’t even something they want because they think that the Sinai Peninsula should belong to Israel as well as long as the West Bank, as long as the East Bank, which includes parts of Jordan, some of them, you actually think they should push all the way to Baghdad. 

And these are the people in charge. So, you have a political alignment in Jerusalem at the moment that is very not just pro-war, but pro slaughter, because they know they can’t just erase 2.3 million Gazans. So they have to make life so miserable that someone, somewhere will take them in. And things have to get a lot worse before a country somewhere around the world, is going to bring in a 2 million people with minimal education and no money. 

Number four politics in the United States. Trump went out of his way when he was building his cabinet to make sure there was no one in the cabinet who could ever tell him something that he didn’t want to hear. And then he basically gutted the national security apparatus of the United States, using people like Tulsi Gabbard, who indirectly or directly worked for the Russians and wanted to destroy it on principle. 

Marco Rubio is the secretary of state and the national security advisor now, and he actually knows what he’s doing. And so Trump has basically shut him and the State Department and the NSC out of the white House so that, there’s no interaction. So the parts of the American national security apparatus, they’re still working aren’t really allowed to report to the president at all. 

And the president decides what types of information get in front of him, while he’s doing everything else he’s supposed to be doing, or comes through Tulsi Gabbard, where it’s usually misinformation. So, President Trump does not have an accurate view of what’s going on in Gaza, much less the rest of the world. And has to compete for everything else he wants to do for his time. 

He hasn’t basically delegated that. So in many ways, we have the general incompetence of the Obama administration, remade. It’s just that Obama didn’t let anyone in the room. Trump has made sure that there’s no one in the room who likes to tell the truth. And that means that the Gaza situation, the Israeli situation, like every situation in the world, is not getting the, the bullet time that it really needs from the American president to make an informed decision. 

So the United States, who would, under normal circumstances, serve as kind of a connector between Israel and the rest of the world, makes things to go too crazy. That’s gone. And it’s really given the Jerusalem government carte blanche to do whatever it wants. 

And finally, while the media is out of control and I don’t mean like the mainstream media, that’s kind of become a joke of late. I mean, like alternate medias and social medias. Two big themes here that are starting to intertwine in a really destructive way. Number one, anti-Americanism, is obviously something that’s always been in the system. 

But over the last 20 years, we’ve seen it become more organized and more conspiracy driven and have better hooks for getting into people’s brains. And rightly or wrongly, there’s a lot of people in that community who see Israel as a front for the United States, or at least as a proxy, or at least as an ally or whatever. 

Everybody makes up their own story, and their propaganda has got a lot more slick of late. And it’s also interfacing with other types of especially the American political issues that just seem weird. So we’ve seen reports recently of the most far left radical, lefty, crazy, commie, socialist, whatever word you want to use. Aspects of this group that are starting to quote people like Marjorie Taylor Greene. 

She is the the CrossFit chick from northern Georgia in the House of Representatives, who we used to go on about Jewish space lasers. She is now being heralded as an anti Israeli viewpoint within the United States. That’s close to the administration and seeing these two things cross is just crazy. Obviously, the second vein is, anti-Semitism of various forms that has been around for a long time, but also now is a lot more slick and organized and coherent. 

And these two things are blending together to make a really powerful narrative that doesn’t have to have facts. That’s part of the general degradation of information communication we’ve had across the world in the last 20 years, where facts and figures go out and the narrative is all that really applies to the situation and every possible way, even before you consider the level of the violence that is going on in Gaza. 

So, if you’re looking for a solution here, I do not have one for you. If there was a solution to the Palestinian situation, we probably would have bumbled into it by accident at some point over the last 60 years. It’s not going to happen now. There is literally no place for the Gazans to go. If they were to be relocated. 

And as long as they are living in Gaza, they are completely dependent upon food aid from the outside world, which the Israelis can turn on or off at a whim. So as a result, we get this not so much of a stalemate, but this extreme increase, of violence. By the Israelis against the Gazans. And before you decide that you want to jump on the bandwagon of condemning the Israelis, keep in mind that Hamas is the one that started this. 

But more than that, Hamas has never, ever had the goal of actually having a two state solution or a modern, independent Palestine. They want a global caliphate where everyone who isn’t Islamic is killed. So, as always with this fight, careful who you condemn. Careful who you cheer for.

Immigration and Tariff Policies Stunt US Economy

Immigrants standing in line in front of an American flag | Licensed by Envato Elements

The Trump-era policies are going full Darth Vader and have the US economy in a chokehold (or force choke for the nerds out there). Today, we’ll be focusing on the policies covering immigration and tariffs.

Nearly all legal (and illegal) forms of immigration have been closed or drastically restricted. This includes high-skilled H-1B visas, which now have six figures in fees; most startups can’t go dropping that kind of dough. Once you mix in all the costly deportations and the retiring baby boomers, the US labor force is drying up quickly.

Tariffs are only adding to the problem. With 10-60% tariffs on imported goods (the Chinese sitting near the top with 50%), we’re beginning to see rapid price increases. Walmart and other retailers are reporting hikes that are only going to get worse.

Fewer workers, higher costs, and not enough domestic investment, all the things you don’t want to hear about an economy. The Fed warns that the only reason a recession hasn’t formally set in yet is because labor demand and the workforce are shrinking at similar rates. That has left the US economy dazed, confused, and highly vulnerable.

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Transcript

Hey, all Peter Zeihan here come from Colorado. Today we’re going to, look at the American economic situation, how a number of Trump policies are coming together in the current environment and where we should expect that to take us during the rest of the year. Short version is the picture doesn’t look great. Let’s start with immigration. 

There’s basically four paths to immigration that the Trump administration has, put the crimps on first. You’ve got your illegal, irregular migrants, who cross the border and then try to slip into the system somehow. Number two, you’ve got your people who try to follow the rules and do it legally. Third, you’ve got your folks who come in on a high skilled visa, something like H-1b, to get a specific job sponsored by a specific company. 

And then finally, you got your rich folk that just come because they went to all four of these routes are in collapse. We now have the Trump administration going into churches during services in order to round up Hispanics and kick them out, as well as intervening in courtrooms and going, where they’re having their hearing on things like asylum or even just to see if they’ve done the paperwork. 

Right. And, before the hearing can happen, escorting them out of the country comes out to about 17 grand per person to do extraditions this way. And it strongly preferences people who do not have criminal records because they’re more likely to be out in public. So the original promise of just going after criminals that has long in the past, and we’re basically going against the rank and file of people who came for jobs or to be with families. 

Regardless of what you think about this, from a legal point of view or an ethical point of view, it it has an absolute impact on the job market. We’ll get to that in a minute. Legal pathways, those are pretty much all been closed down. And that is not simply a Trump two thing. That’s also a trump one thing that is also a Biden thing. 

Most of restrictions that Trump won put on legal migration were actually codified by the Biden administration and now than doubled down on. So you wanna come to United States, there’s only two paths left. 

Number one is you get an H-1b visa. That is the visa that like, say, the tech industry uses to bring high skilled people in to help populate their workforces. The number of those being granted is being reduced by about three quarters. And the fee for it is going up to something between $100,000 and $2 million. What that means is not only are far fewer companies going to do it, but the companies that will do it are only going to be the really big ones. 

So your apple, your meta, things like that. And so if you’re a small startup, you’re now stuck with local labor. And as anyone who’s in the tech space will tell you, there is not enough local labor for a tech industry in any country of the world. There’s a global supply, but there’s only enough to man tech sectors in maybe one quarter of the world’s countries, of which the United States has always been the largest market. 

And by severing the United States from that labor pool, you’re basically guaranteeing that the pace of technological change, will arrest, significantly. And we’ll see impacts of that within a month. And then finally, the only other way to get in is a gold visa. Now, Trump’s original idea was a $5 million gold visa that would get you into the country and basically give you residency. 

There were no takers. None. That’s put too fine a point on it. But if you’ve got $5 million to spend for a green card, you don’t need a green card. So they’ve dropped the price now to $1 million. We’ll see if they get any takers from that. It’s pretty steep. Still has to be approved by Congress. 

So basically, almost every path, for bringing migrants, immigrants, vacationers, whatever you want to call it, you know, have to have a bond to travel the United States for tourism, has been severely crimped, if not closed down completely. And it’s leading to the first population reduction in American history. And, from an economic point of view, we’ve got two issues going on that are both really bad. 

Number one, for the first time since Vietnam, the workforce is shrinking. And for the first time in American history, the labor pool is shrinking. What companies are doing is in this sort of environment, they’re letting go their older employees as they retire the baby boomers, and they’re not hiring replacements. Now, that has happened before. But for that to show up in the data this time as a reduction in overall employment numbers, you’ve got to remember the scale here. 

The boomers were, until very recently the largest generation in American history. And the Zoomers at the bottom of the pyramid right now are the smallest generation in history. So for that to register as a collapse in jobs, the numbers is immense. And it’s the opinion of the Federal Reserve that the only reason we haven’t seen a formal recession yet is that the job market and the labor pool are shrinking at the same rate, and that it’s the fastest we’ve ever seen in any era of American history. 

Now, macroeconomic theory tells us that this will generate and, not particularly long order, a very, very crushing recession. But I’m not ready to say that yet. Jerome Powell, the Federal Reserve is not ready to say that yet because there’s so many things in motion. What we do know for certain is it makes the United States much more vulnerable to any sort of shock, because there’s just simply fewer pillars holding up the system. 

Well, we’re getting that shock because of the tariff policy. We’ve got tariffs ranging from 10 to 60% on various countries in the world. The tariffs are on China at 50%, which is where we get a lot of our consumer goods. And so just since September 1st, just in the last two, three weeks, we’ve now seen price increases across the board that will show up in statistics next month most likely. 

But we’re seeing in corporate earnings already, remind you’re that we went in and out and in and out and in and out of these tariffs from when they were, initially applied in April. There were extensions. There were there were holidays, and most of them are now in place. So we’ve really only had them now for about six weeks, but that’s an long enough time to burn through some inventories and jack up prices on shelves. 

So Walmart, writ large, is looking at a 30% increase in prices across the board, with some items being more than double that. Keep in mind that this is when people are still pulling inventory that they built up during those holidays in preparation, so that 30% increase is going to absolutely increase month on month unless and until these tariffs go away. 

So we have a far weaker employment situation. We have far smaller labor force. We have a far less skilled labor force. We are not seeing the industrial investment that would be necessary to replace the manufactured goods that we’re losing access to, and we have tariffs that are making everything more expensive. This will generate an economic adjustment, in the not too distant future. 

The question is how soon, how bad in which sector? If I were a betting man. Usually not, but here we are. I would say the manufacturing is a sector to look at first, because more blanket the tariff structure, the easier it is to relocate manufacturing supply chain steps outside of the country with the tariff structure and just do it somewhere else, because instead of having product going back and forth across borders, which is how we say produce cars, you then have to pay that tariff multiple times per vehicle, whereas if you build the car completely beyond your shores and then bring in the finished vehicle, you only have to pay it once. And we’re seeing that in the investment decisions of companies that will manifest as employment problems next year. I think we’ll have our economic correction far before that, though.

Saudi Arabia and Pakistan Sign A Mutual Defense Treaty

Shaking Hands after Political Negotiation | Photo licensed by Envato Elements

Saudi Arabia and Pakistan signed a mutual defense treaty last week. And no, you’re not the only one thinking, “Hmmm, why would two countries with mismatched security concerns enter into a defense pact?”

The idea that Pakistan would ever launch a nuclear strike on Saudi Arabia’s behalf is far-fetched to say the least. However, buying some influence with a nuclear power and keeping a clear path to acquiring a nuclear weapon from the Pakistanis (should that need ever arise) isn’t the worst idea for the Saudis.

This pact is the first of its kind, breaking from post-WWII norms of only US-led “all for one” alliances. With the US pulling back on its security commitments, more of these pacts are likely to follow. This means we’re entering a period more reminiscent of pre-WWI commitments and alliances, and that should scare the s*** out of everybody.

Prefer to read the transcript? Click here

Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. Today we’re going to discuss something that happened on the 17th of September. The Saudi Arabians signed a mutual defense treaty with Pakistan. Now, these two countries do not border one another. And the countries that they consider their number one foes. In the case of Saudi Arabia, it’s Iran. 

In the case of Pakistan, it’s India. Don’t line up. But they have basically tried to convince everybody that if somebody threatened Saudi Arabia that the Pakistanis will nuke them. Well, that would be interesting. A couple things to keep in mind here. Number one, in many ways, Saudi Arabia subsidizes the existence of Pakistan. They provide them with debt relief. 

They provide them with below market prices, oil supplies, most people, myself included, has said that, to some degree, this is to ensure that at the end of the day, if Saudi Arabia really needs a nuclear weapon, that the Pakistanis will be open to the conversation of just selling them one. I don’t think that logic has changed, but the idea that Pakistan will just nukes someone on Saudi Arabia’s behalf. 

That fits with the arrogance of Saudi society, especially the ruling House of Saud, probably does not match reality. Second thing to keep in mind is the relatively unprecedented nature of this. If you remember your history, you go back to World War One. Cross linking alliances of mutual defense were kind of the norm. And if somebody attacked country A and country, he had a alliance with country B, country B would then attack the attacker. 

And that led to World War One being a lot nastier than it needed to be, because a lot of these countries had alliances with one another that they didn’t tell anyone about. So when the defense classes were activated, it was kind of a surprise to everybody. Italy definitely fell into that category since then, people take alliances a lot more seriously. 

Number one, World War one sucked. No one had a good time. And number two, we are now in the nuclear age. So an attack on one on this attack on all has a lot more consequences. So in the world since 1945, when the Second World War ended, no countries have initiated or participated in any sort of all for one, one for all alliance, unless it was initiated by and headed by the United States, which remains the only country in the world that really has large scale global deployment capability. 

Saudi Arabia can barely deploy within its own country, and Pakistan. Everything is obviously on the eastern side of the country, facing down India. Neither of them could get troops to the other in a situation where there was real shooting. So the idea that the first meaningful mutual defense pact with a nuclear angle is between two countries with non-overlapping security concerns. 

I don’t find that very serious. And if nukes were not involved, I wouldn’t even bother talking about it. But nukes are involved, and the United States is getting out of the mutual security business. So places especially like Saudi Arabia that have money suddenly are looking for some alternatives, especially since just a few days ago, the Israelis launched missiles over Saudi Arabia to strike a different Arab country. 

Gutter balling to that here. So you know what that is all about. So we should expect to see more and more things like this. And I’m not saying that any particular one of them is serious. What I’m saying is everyone is experiencing it with things that are new and that under normal circumstances, would just be tossed out out of hand. 

We’re not in that world anymore, and we need to think a lot more about like, what things were like in World War one, when you might have a security deal that you don’t tell anyone about because behind the scenes it gives you some chits. It’s a very different system and one where wars will happen a lot more.

The Pressure Is Dialing Up on Russia’s Oil Network

A russian oil refinery

I’ve been discussing the potential for Russian crude supply shortages and a broader collapse of the Russian oil system since the Ukraine War started…so, is it finally happening?

Ukraine’s recent attacks on Russian energy infrastructure have brought a potential oil crisis within arm’s reach. The Ukrainians are getting smarter, striking critical nexus points and ports; refining capacity is dropping, crude is backing up, and storage capacity is running out. These bottlenecks create pressure in the pipelines and wells, and you can imagine what happens next. Should this extend into the winter, frozen wells could add onto the crisis.

Since much of the energy infrastructure in Russia relies upon Western-tech and labor, that leaves them with few options at resolving these issues in a timely manner (if at all). And then you factor in Ukraine’s strikes on the shadow fleet and things begin to get really spicy.

Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here come to you from Colorado. And today we’re going to talk about the net effect of all of these recent waves of attacks by drones and by the Ukrainians on energy infrastructure in Russia. Now, this is following up to a video I did a couple of weeks ago talking about how we were starting to see some really very real damage in the energy complex of Russia, with somewhere between 15 and 20% of the refining capacity going offline. 

Since then, the Ukrainians have massively upped their target set, going in and hitting things that are further away. Now, some of these attacks are more political and mine the ones that places like Moscow, where the political elite lives, or Sochi down in the Black Sea, where the political elite vacations. But the far more important attacks, from the two general categories. 

The first one is the Ukrainians are showing that they can hit targets more than a thousand miles away from their borders. Specifically a place called Bashkortostan. It’s a province in western Siberia, eastern European Russia, populated by ethnic Bashkuri, who are, a Turkic minority. Pretty large one in the Russian space. 

But the fun thing about Bashkortostan is it sits at a pipeline nexus that links pretty much all of the southern Siberian energy fields into the European pipeline network. And so if there’s meaningful damage in Bashkortostan and you’re not just looking at problems with refining their production, you’re talking about upwards of 3 million barrels a day that could get locked in. 

And the Ukrainians have figured out that going after a pumping station is a really good idea if you want to disable some of the pumping infrastructure. That’s part one. Part two. Primorsk. Primorsk is a port on the Gulf of Finland, very close to Saint Petersburg. Gulf of Finland an arm of the Baltic Sea. 

It is arguably, Russia’s top export destination. That the Gulf of Finland writ large. Not only is there Primorsk, there’s a place called Ust-Luga. Both of them have been hit recently, and both of them now are operating below half effectiveness. So Primorsk used to export about a million barrels a day. Now it’s about half that Ust-Luga. 

It used to be about 700,000 barrels a day. Now it’s about half that. You put all this together, and the Russians are facing a crisis point in their energy sector that honestly, I’m a little surprised it hasn’t happened to this point. You see, the Russian energy sector has limited export points that are not well linked together. They’ve got a single spot out on the Far East that kind of has its own network and then out on the western side, they’ve got a few ports on the Baltic Sea and the Black Sea, and the rest are piped exports that go through Ukraine or Belarus into Europe proper. 

Those pipelines have now been shut down. That just leaves the maritime ports. And if something happens, that would prevent crude from, say, reaching for some might be able to go to the Black Sea, but none of it could go out to the Far East. So the Russians are losing flexibility within their system. And now that we’ve got roughly three quarters of a million barrels per day of throughput on the Baltic Sea that can’t flow, and now that we have 20% of refining off line, all of a sudden there’s somewhere in the vicinity of about 2 million barrels a day of crude produced that can’t go anywhere. 

Unlike the American system, where there’s massive tank farms in every major city, the Russians don’t have that. They’re used to producing crude, sending it to refineries, having it turned into fuel and consumed locally or exported. And the rest goes to an export point and is exported. If you have friction in that system where the fuel can’t be produced, then the crude has to go somewhere else. 

It has to go to a port, and if the ports can’t take it, pressure builds up back in the pipeline system all the way back to the wellhead, which means if something doesn’t change in just the next 2 or 3 weeks, there’s going to be so much pressure in the system that either we’re going to have a rupture in the pipeline, which would be really, really bad for any number of reasons, or the Russians are going to have to shut down their production sites back at the wellhead and lock in a million barrels a day or more. 

The problem is, it’s already late September. Winter is almost upon us. And if these pipes are shut down, or if those wells are shut in in the winter, the crude will freeze in the wellhead. And if they want to turn it back on, they can’t just flip a switch. They have to re drill the well. And a lot of these wells are either old or were produced with Western technology, which means it has to be done from scratch with what the Russians can do with themselves or import from the Chinese, which isn’t sufficient for the technology required in order to make it all work. 

So we could be three years into this war, finally on the verge of a crude shortage, because the Russians just can’t play. Well, no. Real soon, repairing things like refineries takes time. Especially if you’re talking about this distillation columns that the Ukrainians have been hitting, the pressure testing that is required to make sure the thing doesn’t explode is something the Russians and the Chinese cannot do themselves. 

They import all of that from the West. It’s going to be a problem getting the parts. And in the case of Primorsk, not only did the Ukrainians hit a pumping station, they also had a couple of ghost fleet tankers. So all of a sudden, whatever insurance the Russian government or the Indian government or the Chinese government has been providing to these ships all of a sudden has to be paid out. 

And that hasn’t happened yet. And so, lo and behold, tankers aren’t going to risk in the volume that they need to be going if the pipeline system is going to stay online. We’ve been waiting for all of these things to happen, either one or the other, for three years, and all of a sudden they’re all happening at the same time. 

It’s kind of exciting.

Nvidia Purchases $5 Billion of Intel Stock

Photo of an INtel microchip

Nvidia announced a $5 billion purchase of Intel stock, but it’s not the game-changer that the headlines are making it out to be.

While Intel is America’s biggest chipmaker, it lags behind TSMC’s cutting-edge nodes. Nvidia is just a design firm, so they don’t possess the necessary manufacturing know-how to improve Intel’s capabilities. So, Intel’s need for the right ecosystem and advanced lithography to create the upper echelon of chips remains.

This is just another case of political appeasement. Nvidia has been in hot water with Washington and Beijing, so they’ll do just about anything to cool things down a bit. But hey, $5 billion is $5 billion.

Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here come from Colorado. And today we’re taking a look at the 18th of September, purchased by Nvidia of roughly $5 billion of stock in American semiconductor manufacturing firm Intel. Now, Intel is by far the largest of the American fab companies. But it gets a bad rap because it’s not TSMC. TSMC, of course, is a Taiwanese based company that is the world’s premier. That makes all the leading processing nodes, especially if it’s below four nanometers. 

Intel is trying to catch up with mixed results. And, in the market, it generally is discounted significantly because it’s not TSMC. And every time they fail to catch up, they get punished. That doesn’t mean it’s not a good company. That doesn’t mean it doesn’t produce a lot of product. 

But if your goal is to make the best of the best, Intel doesn’t do it. 

This is not going to change that. Now, a few weeks ago, the US government under Donald Trump took a 10% share. This will give Nvidia roughly a 4% share. But let’s talk about how semiconductors happen. And then you’ll see that this is not nearly as big of a deal as it might appear at first glance. 

What typically happens is a large consumer of microchips, a Google and Apple, something like that comes to a company like Intel or TSMC, and says that we want to make a new chip that does X, Y, and Z. Here are the parameters we want in terms of performance. And Intel slash TSMC says you’re at the wrong place. You need to go talk to a design firm. 

And so you find a design firm and you jointly put this thing together. All the strategic architecture and then you take that back to your TSMC or your Intel, and then you redesign it again, and you build an instruction booklet that is a few thousand pages of all the steps that are necessary to craft each and every tiny little bit of what goes into each and every aspect of a semiconductor that is then farmed out to an ecosystem that is around the semiconductor fabrication firm, all the companies that build all the individual pieces, all the companies that do all the testing in the incorporation of those pieces into larger chips, motherboards and products. Hundreds of companies involved. And you then get this very thick instruction book, probably several thousand pages. Now, which you hand to TSMC or you hand to Intel. And they use that to follow the instructions to the letter to make the chips. 

Which means a design company like Nvidia partnering with a fab company like Intel. It’s not that it’s a negative, but it kind of misses all the steps in between. Now, Nvidia has been beat around the heads and shoulders first by the American government and most recently by the Chinese government, primarily over its seeming inability and unwillingness to apply technological sanctions and limit their sales to China. 

Nvidia is willing to bend the rules. There’s no argument there, and it seems that in order to placate the Trump administration, they’re putting a what sounds like a big investment, $5 billion into Intel. But this really doesn’t move the needle for anyone. It doesn’t speed up the process. All it does is perhaps give Nvidia an inside track to communicating with Intel in the circumstances, when they decide to build chips that are not cutting edge. 

So it makes a lot of people smile. It makes a lot of people think that, ooh, Intel is going to get better. Nvidia doesn’t have what Intel needs to get better. That would be TSMC. That would be ASML, the company that makes the high end lithography systems. That would be this constellations of dozens, hundreds of mid-tier companies that contribute individual pieces, a lot of which don’t exist in Intel’s network because they’re in Taiwan. 

So it looks nice. And having a few extra billion dollars is never a bad idea if you’re trying to expand your output. But if you’re thinking that this partnership is what is necessary for Intel to turn the page and all of a sudden move up to, say, 2 or 1 nanometer. No, because Nvidia doesn’t have that technology. Nvidia does design, not manufacturing. 

Don’t get the two confused.

The Swiss Are Screwed

Swiss flag over snow capped mpuntains

The Matterhorn, Nestlé Chocolate, and a long-standing history of neutrality, Switzerland has it all. However, the Swiss were too busy enjoying all those comforts and fell asleep at the wheel for the past few decades…

Since the Cold War, Switzerland has assumed that its stockpile of weapons and insulation provided by the EU would protect them. With the Ukraine War creeping closer, the Swiss are realizing much of what they’ve relied upon has been eroding. Their military is weak, banking secrecy has collapsed, trade competitiveness has suffered, and now Trump tariffs are crippling industry.

The Swiss have a couple paths forward, but all options require them to abandon some core component of their belief system (or face economic decline).

Prefer to read the transcript? Click here

Transcript

Hey, all Peter Zeihan here come to you from the Lost Canyon in the Lost Creek Wilderness in Colorado. And today we’re going to talk about Switzerland. Switzerland has some really tough decisions ahead of it in the next few months. Very, very short history of Switzerland, has been a neutral country for quite some time. Has been armed to the teeth quite some time. 

But in the period, especially after World War two and especially after the Cold War system ended, Swiss defense has kind of withered away. You can basically buy an exemption to the draft. Their military recruitment has basically fallen off, and they’ve shut down most of the bunkers that they used to be once famous for. They’ve done this because in the post-Cold War world, we all got along in the European Union, literally surrounds them completely. 

And they fear no invasion from their near neighbors. The Ukraine war was a rude awakening to them, just like all the other Europeans. And now they’re part of the coalition that’s supporting the Ukrainians. But they don’t have enough national defense right now to really be worthy of the name in the traditional sense. It’s number one. Number two, because they’re neutral. 

They have always followed laws their own way. And this made them an offshore banking center. You wanted to launder money, you’d put it there. You were tin dictator. You put it there. No one would ask you questions until a little guy by the name of Barack Obama said, no, we’re not going to do that anymore. We want to tax that money. 

So the Obama administration leaned very, very heavily on the Swiss government and played a part in something called the Financial Action Task Force. And basically, Zurich shut down as international money laundering center. So financial center, but if you want to do something illegal, you probably need to go to Cyprus or Dubai or something like that. So that’s another major industry gone third. 

Now, if you guys have been paying attention the last 30 years, but the eurozone hasn’t had the best time versus the other major economic blocs in the world and Switzerland, their number one trading partner is the collective European Union. And so we saw the Swiss currency gradually go up and up and up and up and up versus the euro, which in trade weighted terms has gone down, down, down, down, down until very recently. 

That means that Swiss industry is broadly uncompetitive, especially in things like agriculture. So that leaves the Swiss with two choices. Number one, subsidize the crap out of it, which is what they do say for their dairy industry. 

It’s beautiful. The farms are amazing, but they’re definitely subsidized and, not cost conscious. Let’s just say that, and then second, the manufacturing has had to get better and better and better, in order to move up the value chain so they can swallow the higher currency. 

So their products are a luxury goods that people will pay for regardless of what the prices. So Swiss watches basically became a national strategy. This led them in the last 30 years to really go into biotech, especially drugs and medications. And that brings us to the current day. Donald Trump has put tariffs on countries that are not based on trade practices, but are based on how much you sell to the United States versus how much the United States sells to you. 

That’s the only fact. Well, that’s one of two factors. The other factor is whether Donald Trump likes you or not. He doesn’t like Switzerland, and the Swiss sell a lot medications and things to the United States. They also sell gold. But Trump loves gold, so he made gold. Carve out. There’s no tax on Swiss gold. 

Anyway, what this means is we now have a 39% tariff. It’s one of the highest out there. And Swiss industry is scrambling and in some cases shutting down because it’s just not viable for them anymore. So the Swiss basically need to do one of three things. Number one, they need to find a way to make Donald Trump like them. 

They couldn’t find a way to make a Barack Obama like them. So I don’t think that’s going to work. Number two, they have to relocate all of their drug manufacturing somewhere else. Trump would obviously like to come to the United States. He has said that we are going to have tariffs on medications coming soon. 

No idea what those numbers are going to be for sure. But the numbers that have been leaked out of the white House suggest somewhere in the 30 to 100% range. So, It’s not clear that the Swiss have an interest of putting in the United States, because that’s only one of their markets, and the sales for each individual market don’t really justify putting it all there. And it you’d lose all your economies of scale if they put some in the EU and some in Japan and some of the United States. 

They’re not sure what to do there, and I blame them. Or third. Shift the political alignments. single largest chunk of Swiss trade is with the European Union. The European Union is a larger entity and can stand up to Trump’s Berlin a little bit better, can get it negotiated a better trade deal. So if, if, if, if the Swiss were to join the EU, that would solve some of their problems. 

Now the Swiss really do not want to do that. They value their neutrality. They value their independence and the independence as not just Switzerland is a state. It goes down at the local level, like the United States has states. They have something called cantons and almost all major decisions in foreign policy and trade and immigration, everything have to pass through approval of each individual canton. 

I mean, this is a country that did not make it legal for women to vote until 1991 because one German canton was holding out. And so for them to join the EU, they would first need to amend their constitutional structure so that this is not how decision making happens in Switzerland, because the EU will never let them in. 

If the Swiss just gum up everything just by being Swiss. So either the Swiss are going to have a catastrophic reduction in their standard of living is industries basically can no longer function in the new environment, or they have to get in bed with the monster that is at the door. And that’s the European Union. Not a great position to be in, but that’s where they are.